Purchasing power across Eastern and Southern Europe is experiencing significant growth, narrowing the gap with Western and Northern European countries. This is highlighted by a recent analysis from market research firm NIQ, which underscores notable regional disparities within these countries.
In the previous year, Luxembourg remained at the top with a purchasing power of €40,931, followed by Denmark at €32,490. At the opposite end of the spectrum, Ukraine, currently embroiled in conflict, reported a purchasing power of just €2,478, equivalent to 14% of the European average. Among EU nations, Bulgaria and Romania occupied the lowest positions, with purchasing powers of €8,629 and €7,738 respectively. Luxembourg’s purchasing power continues to be more than double the EU average and over five times that of Romania.
Despite the lowest purchasing power in the EU, Balkan countries are witnessing the most substantial increases. Spain and Hungary are also showing above-average growth in this regard. Overall, purchasing power inequality within the EU has decreased by nearly nine percent compared to the pre-COVID-19 era, according to the study.
The average purchasing power per capita in the EU last year was €19,756, reflecting a nominal increase from the previous year. EU residents collectively spent approximately €8.9 trillion on essentials such as food, housing, energy, investments, insurance, holidays, and transport.
Significant regional differences persist within nations. For instance, residents of Bucharest have nearly four times the purchasing power of those in the poorest region of Vaslui, with a difference of €11,304.
In terms of food expenditure, Germans spend the least. Filip Vojtech, a retail expert at NIQ, explained that high average incomes and intense competition in the food retail sector in Germany exert downward pressure on prices. Despite recent inflationary trends, food prices in Germany remain relatively low.
Conversely, Slovaks allocate the highest percentage of their budgets to food purchases, driven by high prices and inflation. When it comes to fashion, shoes, and leather goods, Poles and Southern Europeans, including those in the Balkans, are the highest spenders, while Finns spend the least.
Eastern Europeans also dedicate a higher proportion of their consumption budget to retail compared to their Western counterparts. For example, Hungarians and Czechs spent 50% and 44% of their total consumption on retail, respectively, compared to an EU average of 33.9%. This indicates that Eastern Europeans spend every second euro on retail, whereas Germans, benefiting from higher purchasing power, spend only every fourth euro.
The rapid inflation experienced by European consumers in 2022 and 2023 has affected spending habits. While inflation has moderated this year, purchasing power has not kept pace with rising prices. The retail expenditure ratio has declined as people have increasingly allocated funds towards culture and travel rather than just retail.
Hungary recorded the highest inflation rate in the EU last year at 17%, followed by the Czech Republic at 12% and Slovakia at 11%. Overall, the EU’s inflation rate stood at 6.4% last year, with a projected decrease to 2.7% this year.
Source: NIQ and CTK
